Mark Rappaport
President
EFG Companies
Subprime Analytics recently reported the largest reduction in subprime auto finance down payments since 2011. Subprime auto finance down payments experienced a 15% year-over-year decrease in 2015. While down payments are down, the amount financed is up. According to Experian, the average used vehicle loan amount for franchise and independent dealers increased to $18,424 in Q1 of this year.
With the combination of these two trends, it’s no wonder that average subprime loan terms have increased by 4.5% year-over-year since 2012, according to Subprime Analytics. Now lenders are looking to extend loan terms to 84 months.
What do these trends mean for the long-term? For the last year, industry analysts have been telling everyone to wait and see. But, when does waiting and seeing turn into putting our heads in the sand?
Rather than waiting for the market to turn, and reacting to the circumstances that arise, smart lenders are taking proactive steps now to protect their lending portfolios from potential market changes.
Now, you might think, “I don’t want to be the first lender to start tightening lending requirements and lose loan volume and market share.” The good news is you don’t have to jump the gun. Rather, take a step back and look outside the box for solutions that can protect your portfolio and increase loan volume.